Updated Integrated Development Plan ("IDP”) Highlights (effective date January 1, 2024):
- The DFS Case evaluates the Stage 3 Expansion to 1.2 million tonnes per annum ("mtpa”), consistent with the 2022 IDP, representing a 100% throughput increase from the 600,000 tpa Stage 2A Expansion design throughput (upgraded from 500,000 tpa in the 2022 IDP). Stage 3 involves a new standalone 1.2 mtpa process plant and supporting infrastructure, which is currently under construction, with mining focused on the Kora Central Zone within the Kora Deposit and Judd Deposit, utilizing a cut-off grade of 3.5 grams per tonne ("g/t”) gold equivalent ("AuEq”).
- After-tax NPV5% US$680 million at US$1,900 per ounce gold and at around current spot prices, at US$2,600 per ounce gold, After-tax NPV5% is US$1.2 billion.
- Average annual run-rate production of 303,288 ounces AuEq per annum, run-rate achieved in 2027 and a peak annual production of 319,360 ounces AuEq in 2027.
- Life of Mine average cash costs of US$380 per gold ounce or US$694 per AuEq ounce and all-in sustaining cost ("AISC”)(2) of US$665 per gold ounce or US$920 per AuEq ounce over a 7-year mine life. The mine life is now extended to 2030, previously 2028 in the 2022 IDP.
- Growth capital cost of US$194 million and life-of-mine sustaining capital cost of US$337 million.
- The alternate PEA Case evaluates two-stages of expansions to a run-rate throughput of 1.8 mtpa, representing a 200% throughput increase from the 600,000 tpa Stage 2A Expansion design throughput (upgraded from 500,000 tpa). The ultimate run-rate throughput of the second expansion is referred to as Kainantu Stage 4 Expansion, operating two standalone process plants, larger surface infrastructure and mining throughputs achieved by mining Kora Upper, Lower, and Central Zones within the Kora Deposit, and the Judd Deposit, utilizing a cut-off grade of 4.0 g/t AuEq.
- After-tax NPV5% of US$2.3 billion at US$1,900 per ounce gold and at around current spot prices, at US$2,600 per ounce gold, After-tax NPV5% is US$3.5 billion.
- Average annual run-rate production of 413,593 ounces AuEq per annum, run-rate achieved in 2028 and a peak annual production of 484,692 ounces AuEq in 2034.
- Life of Mine average cash costs of US$174 per gold ounce or US$633 per AuEq ounce and all-in sustaining cost ("AISC”)(2) of US$432 per gold ounce or US$822 per AuEq ounce over a 14-year mine life. The mine life is now extended to 2037, previously 2032 in the 2022 IDP.
- Growth capital cost of US$201 million and life of mine sustaining capital cost of US$900 million.
- Prior to the January 1, 2024 Updated IDP effective date, $15 million of expansion growth capital was spent. The total growth capital for the project, remains closely aligned with the operational guidance announced on February 22, 2024 of US$210 million. As at September 30, 2024, approximately 63% of the total growth capital for the Stage 3 and 4 Expansions is either spent or committed, and subsequent to quarter end, following the award of the river crossing construction contract in October, approximately 68% of total growth capital has either been spent or committed.
- A major driver for the improvement in economics is the significant increase to the Mineral Resource estimate at Kora and Judd reported in Q4 2023 and incorporated into the Updated IDP, with Measured and Indicated Resources increasing by 14% to 2.6 million ounces at 10.0 g/t AuEq and Inferred Resources increasing by 73% to 4.5 million ounces at 8.5 g/t AuEq.
- Both the DFS and PEA Cases are fully funded from existing cash balances, mine cash flow and available liquidity through credit facilities. K92 is in a strong financial position having, as at June 30, 2024, a cash balance of US$71 million and up to US$110 million in remaining undrawn liquidity from the Trafigura Credit Facilities. K92 recently announced record Q3 2024 AuEq production of 44,304 oz which has resulted in an increase to its cash balance, even with significant capital expenditures for the expansion (see October 9, 2024 press release).
- Both the DFS and PEA Cases have a low environmental impact, being supplied with clean hydroelectricity, mining high grades outlining a low footprint, no-cyanide operation, and a majority of tailings reporting underground as pastefill. K92 plans to upgrade the grid infrastructure, which is expected to significantly reduce greenhouse gas emission intensity per ounce produced near-term.
- AuEq - calculated on the following metal prices: Au - US$1,900/oz, Ag - US$25.00/oz, Cu - US$4.50/lb. Note that gold equivalent factors for the production estimates are different to those used for reporting the Mineral Resource estimate.
- AISC - All-In Sustaining Costs include cash costs plus estimated corporate general and administrative ("G&A”) costs, sustaining costs and accretion.
The Updated IDP supersedes the January 1, 2022 effective date Integrated Development Plan ("2022 IDP”) and has delivered a significant improvement in economics in both the DFS Case and the PEA Case, and particularly the PEA Case, driven by the following key changes:
- A significant increase to the Mineral Resource estimate at Kora and Judd reported in Q4 2023 (see December 5, 2023 press release), with Measured and Indicated Resources increasing by 14% to 2.6 million ounces at 10.0 g/t AuEq and Inferred Resources increasing by 73% to 4.5 million ounces at 8.5 g/t AuEq. This has extended the mine life for the DFS Case to 2030 from 2028 and the PEA Case to 2037 from 2032 from the 2022 Integrated Development Plan (see September 12, 2022 press release).
- The new off-take agreement with Trafigura, commencing January 1, 2026, which has improved metals' payabilities for deliveries of concentrates, in addition to amending penalties, treatment and refining charges, and transport charges, all of which are better than the assumptions used in the 2022 IDP.
- Significant margin expansion forecasted, as cash costs and all-in sustaining costs in the Updated IDP have only moderately increased from the 2022 IDP, while the economic evaluation gold price has increased from $1,600/oz to $1,900/oz to be closer aligned to recent peer studies and the current commodity price environment. Cut-off grades were slightly modified in the Updated IDP to achieve the optimal mine plan, with the cut-off grade for the PEA Case reduced from 4.5 g/t AuEq in the 2022 IDP to 4.0 g/t AuEq and the cut-off grade for the DFS Case increasing from 3.0 g/t AuEq in the 2022 IDP to 3.5 g/t AuEq. The updated IDP has made only limited changes to the mining method and recovery method from the 2022 IDP, with changes made to improve the pastefill plant and delivery design.
- Limited forecasted Updated IDP growth capital cost inflation in a rising commodity price environment. This has been demonstrated to date from the construction activities well underway at the Kainantu Gold Mine for the Stage 3 and 4 Expansions. Importantly, the total growth capital for the project, remains closely aligned with the Operational Guidance announced in February 2024 of $210 million (see February 22, 2024 press release), that incorporated design and scope changes, including improving the expandability of the process plant and redesigning the pastefill plant to mitigate transport and delivery risk (trucking filter cake to an underground pastefill plant - previously involved extensive pumping and piping). Prior to the January 1, 2024 Updated IDP effective date, $15 million of expansion growth capital was spent. As at September 30, 2024, approximately 63% of the total growth capital for the Stage 3 and 4 Expansions has either been spent or committed, and subsequent to quarter end, following the award of the river crossing construction contract in October, approximately 68% of total growth capital is either spent or committed.
- Throughput increase for the PEA Case to 1.8 mtpa from 1.7 mtpa driven by the Stage 2A Plant design throughput being upgraded from 500,000 tpa to 600,000 tpa as demonstrated from recent planted performance.
The PEA is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the PEA will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mineral Reserves are defined by the Definitive Feasibility Study and are not predicated on the Preliminary Economic Assessment in any way.
John Lewins, K92 Chief Executive Officer and Director, stated, "The Updated Integrated Development Plan is a major milestone for K92, marking a significant improvement to mine economics by incorporating a larger updated Mineral Resource estimate, a new off-take agreement with Trafigura, more robust engineering designs and information from our ongoing construction activities, along with margin expansion from improved commodity prices.
This has resulted in the DFS Case NPV5% increasing from US$586 million at $1,600/oz in the 2022 IDP to, in the Updated IDP, US$680 million at $1,900/oz, or US$1.2 billion at near-spot prices of $2,600/oz. The PEA Case saw its NPV5% rise from US$1.3 billion at $1,600/oz in the 2022 IDP to, in the Updated IDP, US$2.3 billion at $1,900/oz or US$3.5 billion at near-spot prices of $2,600/oz gold.
Importantly, the realization of strong cash flow and the economic benefits of the Updated IDP are expected near-term. In less than nine months, the commissioning of the Stage 3 Plant Expansion is planned to begin, marking the start of K92's transformation into a Tier 1 Mid-Tier Producer. Concurrent with advancing the Stage 3 and 4 Expansions, we remain very active in improving upon the outcomes of the study, particularly through exploration. There are currently 11 drill rigs on site of which 6 are operating underground and 5 on the surface, focused on upgrading and expanding resources both near-mine and across our highly prospective gold-copper district.
Later this month, we are excited to host a large group of analysts and investors on-site to showcase our progress to date in multiple areas and also the mining-friendly jurisdiction of Papua New Guinea.”
1 - Kainantu Updated IDP - Definitive Feasibility Study Case
1.1 - DFS Overview
The DFS evaluates an expansion of mining and processing to a run-rate throughput of 1.2 mtpa, representing a 100% increase from the Stage 2A Expansion run-rate of 600,000 tpa. This expansion is referred to as the Stage 3 Expansion and involves on-site treatment of ore by a new standalone 1.2 mtpa process plant, utilizing single stage crushing, SAG and ball milling, along with gravity and flotation recovery.
The DFS and Mineral Reserve statement is derived from the global Kora and Judd Mineral Resource Estimate (September 12, 2023 effective date), net of post-resource mining depletion from September 12, 2023 to December 31, 2023, and does not incorporate post-resource-estimate drilling results.
Table 1.1: DFS Highlights
| US Dollars unless otherwise stated | Updated IDP | |
| Life of Mine (starting January 2024) | Stage 3 Run-Rate(1) (2027-2029) | |
| Production | ||
| Mine life (years) | 7 years | |
| Total mill feed (000s tonnes) | 6,176 | 3,600 |
| Average mill throughput (000s tonnes per annum) | 882 | 1,200 |
| Total Metal Production | ||
| AuEq (000s ounces) | 1,561 | 910 |
| Gold (000s ounces) | 1,223 | 666 |
| Copper (million lbs) | 126 | 92 |
| Silver (000s ounces) | 2,910 | 1,986 |
| Peak Annual Production | ||
| Year | 2027 | |
| AuEq (000s ounces per annum) | 319 | |
| Average Annual Metal Production | ||
| AuEq (000s ounces per annum) | 223 | 303 |
| Gold (000s ounces per annum) | 175 | 222 |
| Copper (mlbs per annum) | 18 | 31 |
| Silver (000s ounces per annum) | 416 | 662 |
| Average Grade | ||
| AuEq grade (g/t) | 8.5 g/t | |
| Gold grade (g/t) | 6.7 g/t | |
| Copper grade (%) | 1.0% | |
| Silver grade (g/t) | 19 g/t | |
| Average Recovery | ||
| Gold recovery (%) | 93% | |
| Copper recovery (%) | 94% | |
| Silver recovery (%) | 78% | |
| Costs | ||
| Mining cost (US$/t ore mined) | $68.05 | $57.73 |
| Processing cost (US$/t processed) | $19.44 | $18.12 |
| G&A cost (US$/t processed) | $37.11 | $33.38 |
| Paste plant cost ($/t processed) | $10.31 | $13.32 |
| TSF cost ($/t processed) | $0.64 | $0.48 |
| Transport and Insurance cost ($/t processed) | $9.85 | $10.93 |
| Total operating cost per tonne processed (US$/t) | $145.40 | $134.56 |
| Royalties ($/t processed) | $10.90 | $10.93 |
| Sustaining capital per tonne processed (US$/t) | $54.59 | $34.47 |
| Total cost per tonne processed (US$/t) | $210.88 | $179.96 |
| Growth capital expenditure ($m) | $194 | |
| Sustaining capital expenditure ($m) | $337 | |
| Total capital expenditure with closure costs ($m) | $541 | |
| Cash cost per ounce AuEq ($/oz)(2) | $694 | $646 |
| All-in sustaining cost per ounce AuEq ($/oz)(3) | $920 | $789 |
| Cash cost per ounce gold ($/oz)(2) | $380 | $204 |
| All-in sustaining cost per ounce gold ($/oz)(3) | $665 | $397 |
| Base Case Economic Analysis at US$1,900/oz Gold, US$4.50/lb Copper and US$25.00/oz Silver | ||
| After-tax NPV0% | $869 million | |
| After-tax NPV5%(4) | $680 million | |
| Economic Analysis at $2,500/oz Gold, US$4.50/lb Copper and US$25.00/oz Silver | ||
| After-tax NPV0% | $1,359 million | |
| After-tax NPV5%(4) | $1,091 million | |
- Run-rate is calculated based on 2027-2029.
- Cash costs are net of by-product credits and are inclusive of mining costs, processing costs, site G&A and refining charges and royalties.
- AISC includes cash costs plus estimated corporate general and administration costs, sustaining costs, and accretion.
- Net present value is calculated utilizing monthly discounting.
The Mineral Reserve estimate outlined in the DFS was prepared by Daniel Donald FAusIMM MSME of Entech, in accordance with the classification criteria set out in the 2014 CIM Definition Standards for Mineral Resources and Mineral Reserves prepared by the CIM Standing Committee on Reserve Definitions. Daniel Donald is an independent consultant of the Company and is a Qualified Persons as defined by NI 43-101. The total Mineral Reserve for the Kainantu Project is shown in Table 1.2. The Mineral Reserve estimate is based on the Global Kora and Judd Mineral Resource estimate (September 12, 2023 effective date - refer to Table 1.3), net of post-resource mining depletion from September 12, 2023 to December 31, 2023, of 183,768 tonnes at 8.1 g/t Au, 0.9 % Cu and 15 g/t Ag.
Table 1.2 - Kainantu Mineral Reserve Statement (Effective Date January 1, 2024)
| Kora and Judd Deposit Reserve Summary (January/2024) | |||||||||
| Tonnes | Gold | Silver | Copper | Gold Equivalent | |||||
| mt | g/t | moz | g/t | moz | % | kt | g/t | moz | |
| Kora Deposit | |||||||||
| Proven | 2.95 | 7.4 | 0.70 | 19 | 1.9 | 1.1 | 31 | 9.4 | 0.89 |
| Probable | 2.52 | 5.7 | 0.46 | 19 | 1.6 | 1.0 | 26 | 7.6 | 0.61 |
| Proven & Probable | 5.47 | 6.6 | 1.16 | 19 | 3.4 | 1.1 | 57 | 8.6 | 1.50 |
| Judd Deposit | |||||||||
| Proven | 0.24 | 8.3 | 0.06 | 17 | 0.1 | 0.6 | 1 | 9.4 | 0.07 |
| Probable | 0.47 | 6.5 | 0.10 | 13 | 0.2 | 0.5 | 2 | 7.5 | 0.11 |
| Proven & Probable | 0.71 | 7.1 | 0.16 | 14 | 0.3 | 0.5 | 4 | 8.1 | 0.18 |
| Consolidated | |||||||||
| Total Proven | 3.19 | 7.5 | 0.77 | 19 | 2.0 | 1.0 | 33 | 9.4 | 0.96 |
| Total Probable | 2.99 | 5.8 | 0.56 | 18 | 1.8 | 1.0 | 28 | 7.6 | 0.73 |
| Total Proven & Probable | 6.18 | 6.7 | 1.32 | 19 | 3.7 | 1.0 |
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